FEDERAL BUDGET 2016 SUPERANNUATION

THE CHANGES ANNOUNCED IN THE 2016 BUDGET IN RELATION TO SUPERANNUATION ARE SIGNIFICANT AND WILL MAKE IT DIFFICULT TO ACCUMULATE LARGE SUPER BALANCES.

THE PROPOSED CHANGES LARGELY APPLY FROM JULY 2017. MORE DETAIL FOLLOWS:


- $1.6 Mil. cap on 0% tax rate on Pension Funds

It’s proposed from 1July 2017 to limit the profits/earnings that can qualify for the current 0% fund tax rate for when a pension is paid out of a fund. Super balances or the portion in excess of $1.6 mil, will attract the standard 15% tax on profit/earnings. 


- $500k lifetime non-concessional contributions cap

A lifetime limit of $500k of after tax (non-concessional) contributions was announced, being far less useful than the current $180k/$540k cap which has no lifetime limit. Contributions from 1st July 2007 will be counted towards the lifetime limit cap however nothing will have to be done if the cap was exceeded at budget night. Any contributions made after 7:30pm on 3rd May 2016 will need to be removed otherwise a penalty will apply.


- Concessional (before tax) contributions tax to increase for higher income earners

From 1st July 2017 concessional contributions made by an individual who has an adjustable taxable income of more than $250k will pay 30% tax on their contributions rather than 15%. The income threshold will reduce from $300k.


- Reduction in the Concessional (before tax) contributions cap

From 1st July 2017 the concessional contributions cap will reduce from $35k/$30k to $25k.


- Transition to Retirement Pensions

Currently those who take a Transition to Retirement Pension have their fund’s earnings taxed at 0%.

The proposal will have the fund’s earnings taxed at 15% when a Transition to Retirement Pension is taken out from 1st July 2017.


- Tax Deduction for Super Contributions

From 1st July 2017 all individuals up to the age of 75 will be able to claim a tax deduction for personal contributions.

As mentioned before concessional contributions will be capped at $25k if the proposed changes go through.

- Removal of the ‘work test’ for superannuation contributions

Contribution made from 1st July 2017 for individuals aged between 65 and 74 will now be able to contribute to super irrespective of their working status.

The current work test for those individuals is; those individuals need to work at least 40 hours over any 30 day period in a financial year.

Article by Michael Gigliotti

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